Английский язык. Практический курс для решения бизнес-задач

Never underestimate the value of historical performance, which demonstrates the company’s ability (or inability) to increase shareholder value. Do keep in mind that the past performance of a stock does not guarantee future performance – the job of the value investor is to determine how well the company can perform, as well as it did in the past. Determining this is tricky, but evidently Buffett is very good at it.

5. Do the company’s products rely on a commodity?

Initially you might think of this question as a radical approach to narrowing down a company. Buffett, however, sees this question as an important one. He tends to shy away from companies whose products are indistinguishable from those of competitors, and those that rely solely on a commodity such as oil and gas. If the company does not offer anything different than another firm within the same industry, Buffett sees little that sets the company apart. Any characteristic that is hard to replicate is what Buffett calls a company’s economic moat, or competitive advantage. The wider the moat, the tougher it is for a competitor to gain market share.

6. Is the stock selling at a 25% discount to its real value?

This is the kicker. Finding companies that meet the other five criteria is one thing, but determining whether they are undervalued is the most difficult part of value investing, and Buffett’s most important skill. To check this, an investor must determine the intrinsic value of a company by analyzing a number of business fundamentals, including earnings, revenues and assets. And a company’s intrinsic value is usually higher than its liquidation value.

Once Buffett determines the intrinsic value of the company, he compares it to its current market cap. If his measurement of intrinsic value is at least 25% higher than the company’s market cap, Buffett sees the company as one that has value. Sounds easy, doesn’t it? Well, Buffett’s success depends on his unmatched skill in accurately determining this intrinsic value. While we can outline some of his criteria, we have no way of knowing exactly how he gained such precise mastery of calculating value

Conclusion

Buffett’s investing style, like the shopping style of a bargain hunter, reflects a practical, down-to-earth attitude. Buffett maintains this attitude in other areas of his life: he doesn’t live in a huge house, he doesn’t collect cars and he doesn’t take a limousine to work. The value-investing style is not without its critics, but whether you support Buffett or not, the proof is in the pudding. As of 2004, he holds the title of the second-richest man in the world, with a net worth of more $40 billion (Forbes 2004).

Source: April 22, 2005; investopedia

Essential Vocabulary

1. modern portfolio theory (MPT) – современная теория портфеля

2. standard deviation – стандартное отклонение

3. mean n – среднее значение, середина

4. inherent a

– внутренний, внутренне присущий

5. picking winners – выбор победителей (выбор компаний с большим потенциалом развития как объекта капиталовложений)

6. nest eggs – деньги, откладываемые на «черный» день, для получения дохода после выхода на пенсию или для крупной покупки

7. systematic risk – систематический или рыночный риск

8. unsystematic (specific) risk – несистемный риск

9. covariance n – ковариация

10. efficient frontier

– эффективная граница

11. risk-free – безрисковый

12. portfolio management – управление портфелем

13. gilts n, pl (gilt-edged securities) – ценные бумаги «с золотым обрезом» (первоклассные, самые надежные облигации)

14. risk taker – идущий на риск инвестор

15. compound a – начисляемый, кумулятивный, сложный (процент)

16. value investing – инвестиции в акции компаний с высокой дивидендной доходностью и низким отношением цены к прибыли

17.intrinsic a

– внутренний

18. efficient market hypothesis (ЕМН) – гипотеза эффективного рынка (гипотеза, по которой при полном доступе рынка к информации цена акции на данный момент является лучшей оценкой будущей цены)

19. return on equity (ROE) – доходность собственного капитала

20. gearing n – отношение заемного капитала к собственному

21. kicker n – «завлекалочка» (дополнительное условие, повышающее привлекательность для инвестора)

22. liquidation value – ликвидационная ценность

Exercise 1. Answer the following questions.